For a variety of reasons, a residential mortgage holder may need to obtain consent to let his or her home. These can include temporary work assignments, property-owning couples moving in together, or any number of unexpected changes in family circumstances.
If you are planning to become a landlord, you need to inform your lender about your intentions. This is because letting your property involves an important change to the terms of your mortgage.
Some mortgage-holding homeowners are concerned when they first hear about the need to obtain consent to let, but in reality the majority of lenders claim to grant permission in most cases. You have a good chance of success if your financials are in order and your application is honest, complete and submitted with the right documentation.
‘Consent to let’ means permission from your residential mortgage provider to let your home to paying tenants. This differs from having a buy-to-let mortgage, for which the intention to lease the property is made clear at the time of the application.
Some mortgage lenders use the term ‘consent to lease’ and others prefer ‘consent to let’. You can rest assured that there is no difference in meaning between the two. For the purpose of this article, we’ll use the term ‘consent to let’.
Since 2013, mortgage providers have been cracking down on borrowers who decide to let their properties without obtaining prior consent.
Based on the belief that you’ll be living in the property yourself, your mortgage provider will have (1) granted your mortgage application and (2) set your interest rates and repayment terms. By applying for consent to let, you give your lender the chance to reassess these terms and change them to reflect the risks that come with being a landlord.
They will also need to be satisfied that your intention to let your property has come about through a genuine change in your circumstances. In other words, they will not be happy if it appears your intention was always to let your property, and that you applied for a residential mortgage simply to secure a better mortgage deal.
It is much easier to convince them that this is not the case if you’ve been already paying your mortgage for a reasonable period of time. Some mortgage providers stipulate a minimum period of six months before they’ll give consent to let, although members of the Armed Forces are usually exempt from this.
Renting out your property without consent to let could land you with some stiff penalties – in some cases an extra 1% on top of your new consent-to-let interest rate, a one-off fine, and a demand for back payments to cover the extra interest owed.
The main reason that lenders tend to hike their interest rates for consent-to-let mortgages – typically by 1 to 2% plus an administration fee – is that they view them as riskier. This is mainly on account of the potential for:
Your mortgage provider is also likely to be in a strong bargaining position, given that many borrowers are effectively locked into their mortgages for the short-term at least.
That said, some lenders allow borrowers to remain on their current interest rate for a fixed term or to the end of their existing deal, but expect to pay an administration fee for the privilege. The downside is that when your existing consent-to-let mortgage deal ends, you’ll have to choose a rate from their buy-to-let mortgage range rather than continuing on your preferential residential rate.
You can find a full breakdown here .
The process for getting a consent-to-let mortgage differs slightly between lenders. Typically, it involves either:
In some cases, you can download a consent-to-let application and print it off yourself, while other lenders will only provide them on request. Complete the form with as much detail as you can. It’s likely that you’ll also be expected to provide supporting documentation, so double check that you’ve included everything they require. Incomplete applications are one of the main reasons that permission is refused.
Expect to be asked questions about how you would cope financially with a void period or non-paying tenants, as you will need to satisfy your lender that you have the necessary savings and contingencies in place.
A consent-to-let letter is written evidence of your permission to let your property, which will be provided by your lender should they accept your application. Some letting agents will want to see this before entering into a contract with you as a landlord.
Some savvier tenants have even been known to ask to see their landlords’ consent-to-let letters. Not being able to produce one could spell trouble, so going ahead and letting your property without consent to let is highly inadvisable.
If your application for consent to let has been refused by your mortgage lender, we advise contacting them for an explanation before taking matters further. If you feel you have grounds for appeal or complaint, contact the Financial Ombudsman .
The alternatives are to apply to remortgage the property as a buy to let, which presents its own challenges as the requirements are typically higher than for a residential mortgage, or ultimately to sell the property.
Due to the tough penalties and increasingly stringent checking practices that many lenders now have in place, simply ignoring your mortgage provider’s decision is strongly discouraged.
If you’re thinking of letting your home, take a look at our comprehensive collection of tips and advice for landlords to help you start on the right track.